"The bottom line is that the documents we relied on should not have been used," Editor Russ Stanton said in a story posted Wednesday night on the newspaper's Web site. "We apologize both to our readers and to those referenced in the documents ... and in the story."
Pulitzer-prize winning reporter Chuck Philips, who wrote the story, and his supervisor, Deputy Managing Editor Marc Duvoisin, also apologized.
Combs denied that he had any prior knowledge of or involvement in the robbery and shooting of Shakur at a New York recording studio. He and other subjects of the story claimed they had been defamed by the newspaper.
The Smoking Gun said the documents seemed phony because they appeared to be written on a typewriter instead of a computer and included blacked-out sections not typically found in such documents, among other problems.
The Web site claimed the documents were fabricated by a prison inmate with a history of exaggerating his place in the rap music world.
The Times said its March 17 story was based on FBI records, interviews with people at the scene of the 1994 shooting, and statements to the FBI by an informant.
None of the sources was named.
Philips said Wednesday that a former FBI agent examined the documents in question for him and said they appeared to be legitimate.
But Philips said he wished he had done more to investigate their authenticity.
"I now believe the truth here is I got duped," he said.
Marc Lichtman, an attorney representing rap manager James Rosemond, one of two men the story linked to the Shakur attack, had earlier demanded an apology.
"I would suggest to Mr. Philips and his editors that they immediately print an apology and take out their checkbooks - or brace themselves for an epic lawsuit," Lichtman said Wednesday.
The shooting triggered a feud between East and West Coast rappers that led to the killings of Shakur and Notorious B.I.G.
The story said associates hoping to curry favor with Combs, who was overseeing B.I.G.'s white-hot career at the time, lured Shakur to the studio because of his disrespect toward them.
The story and related features on latimes.com attracted nearly 1 million hits, more viewers than any other story on latimes.com this year, the newspaper said.